Siemens racing credit's end date

Saturday

With less than two weeks before expiration of a federal tax credit for wind, officials with Siemens Energy continue to pursue projects that will beat the deadline, company officials said.

"We're actively pursuing a number of projects we hope to get signed by the end of the month," said Mark Albenze, CEO of Siemens Wind Power Americas. "We have a couple already signed. Our focus has been on executing contracts. I imagine in the first couple of weeks of January we'll make some announcements, both for projects in the U.S. and Canada."

A massive project in Iowa that was the focus of a Dec. 16 announcement at Siemens blade manufacturing plant in Fort Madison, Iowa has actually been in production at the Hutchinson plant since September. The Hutchinson News initially reported on the award in July, following a Chamber of Commerce presentation by Hutchinson plant manager Gus Shaar.

Siemens this week identified MidAmerican Energy's order for 1,050 MW of power - not only the largest onshore wind turbine order for Siemens, but the largest single order for any onshore wind power contract in the world to date.

"We decided with the customer to make a joint announcement at the factory in Iowa and they picked Dec. 16," Albenze explained. "The customer did sign the contract with us earlier in the year, but we were waiting for them to get a few approvals to go forward with this."

Siemens has already completed part of the project contract, adding 44 megawatts to the utility's existing wind farm in Marshall County, and it is generating power. But the remainder of the 448 turbine order will keep the Hutchinson plant humming for nearly two years, Albenze said.

MidAmerican plans to bring 506 megawatts online in 2014 and the remaining 500 megawatts in 2015.

"We'll do about half the project in 2014 and half in 2015," Albenze said. "We'll be manufacturing and shipping this order over the next 18 months."

The total contract, which includes towers supplied by Broadwind Energy, is valued at $1.9 billion.

"We are currently shipping to Canada right now, for a project there," Albenze said. "We have orders from the Pacific Northwest, orders in Texas and North Dakota and a few other states. We have a good backlog."

Besides the orders that must be secured before the end of the year to qualify for the PTC, Siemens is also working on additional contracts for Hutchinson nacelles in Canada that don't have the tax credit deadline pressure, "which we hope to announce over the next year," Albenze said.

The Hutchinson plant is operating at about 70 percent capacity, with 330 employees, which leaves room for rush orders or future projects, Shaar said.

"It's a level load, which is a better operating scenario for our plant and employees," Shaar said.

Last year, when the plant was operating at full capacity with more than 400 employees, it was to meet rush demand imposed by rules of the Production Tax Credit that said turbines had to be installed before the end of the year to qualify for the credit. Now, a contract has only to be signed and a percentage of the project cost committed before Dec. 31 to qualify.

Besides its signature 2.3 megawatt turbine, the Hutchinson plant has started production of the "back end" of Siemens 3.0 megawatt direct-drive turbine for a customer in the North Dakota, as well as power units to support a Siemens factory in Europe.

"Our direct drive unit has three components: the hub in front, the middle is a generator and the nacelle is in the back end of what sits on top of the tower," Shaar explained. "We are manufacturing the back end here. The generator is still being built in another operation, but we build 60 percent of the completed turbine."

Siemens is targeting February for the first shipment of the 3.0 nacelles. Besides the Dakotas they have orders for the unit in Canada and Peru, and expect the Hutchinson plant to serve both its North and South American markets, Albenze said.

"We have a number of customers interested in those products," he said. "We expect to have a nice backlog."

Also, the power units and assembly site part kits now being put together in Hutchinson previously were done in Denmark, Albenze said.

"It made good economic sense to bring those jobs to Kansas," he said. Both are parts necessary for turbine installations, and join production of turbine hubs and nacelles here.

PTC role

While operations are going well in Hutchinson, it's important, Albenze said, for the government to establish an energy policy that includes some level of tax credit.

"We're looking for a long term energy policy that provides us some long term stability so we can continue to look to invest in Hutchinson," Albenze said, "like bringing the back end and site parts and power units to Hutchinson."

While wind energy prices are very low in some parts of the country, and could likely attract buyers without a tax credit, in other parts of the country there isn't price parity with more conventional energy sources, Albenze said.

Bill Fehrman, MidAmerican's CEO, stated during the Iowa announcement on Monday that production tax credits were "very crucial to our decision to move forward with this project."

"All energy policies have some type of tax incentive that promotes positive growth," Albenze said. "The PTC is the one that expires; all the others are written permanently into law. We're looking for comprehensive tax policy that includes all forms of energy or retains the PTC for as long as possible."

"We built these factories (the Hutchinson nacelle plant and Iowa blade plant) in the U.S. for domestic use, but because of their competitiveness and the workforce, these facilities have become competitive for export outside the U.S.," Albenze said. "It's a real testament to what the PTC does."

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